Sampling of Changes in the Primary and Secondary Markets; Maybe Short Term Rates are Fine Where They Are

I have been speaking with plenty of mortgage bankers in recent weeks - what are they saying? The refi biz is alive and well but slowing markedly - the volumes are much to the concern of investors who paid up for loans with higher rates only to see them prepay. And so lenders are girding their loans, uh, I meant loins, for premium recapture. Obviously the huge lock days in January will result in good February and March volumes (but don't forget margins and gain per loan!) that will come at the expense of servicers and owners of the loan assets: faster factors ahead. And management will once again grapple with whether or not to pass early payoff penalties or premium recaptures on to originators. And staffing in these types of accordion-style volume moves is difficult at best.

Yesterday this commentary mentioned some mortgage shopping sites. Rich Rizzuti sent along a calculator that tells one where they stand in terms of income and tax brackets. "This calculator tells you, based on how much you make, where you rank in overall income: are you in the top 1%, 10%, and so on. It also tells you how much you and your (mostly) same tax bracket buddies paid as a percent of the total tax collected. I thought it interesting (after playing with the numbers for a little while) that the top 1% pays 38.1% of total income taxes. That means that the other 99% pay 61.9% of the tax burden. Heck the top 25% pays 86.4% of total taxes. And they say the top 1% doesn't pull their weight. I'm not saying I don't want my taxes to be lower, but I certainly have no issues with the top 1% who mostly worked extremely hard to get where they are (or had a relative who did).

Let's play a little catch up on lender and investor updates over the last several weeks to see if we can divine any trends out there...

Stearns has posted VA improvements. The highlights include VA Cash Out - Up to $150,000 Cash Out for loan amounts exceeding conforming limits ($417,000 or $625,500 for AK/HI), between 90-100% LTV, FICO requirements apply. For LTVs > 90%, the $5,000 cap has been removed Click Here for more highlights. Additionally, Stearns is now offering Conforming Fixed and MyCommunity 97% LTV through FNMA - Click Here for comparison information.

United Wholesale Mortgage (UWM) announced that it launched a product which offers conventional financing on up to 97 percent loan to value (LTV). Program highlights include: instant M.I. available up to 97 percent, gift funds eligible for down payment and reserves; available on purchase and rate/term refinance transactions, Standard conventional and MyCommunity Mortgage options, at least one borrower must be a first-time homebuyer, No homebuyer counseling required for standard 97% conventional and 1-unit properties only.  Find out more by visiting UWM.

Flagstar has implemented Fannie Mae's expansion to allow 97% LTV purchase transactions. Reserves determined by DU but may be funded by eligible gifts, DU Approve/Eligible required. For additional details, click here.

LDWholesale is allowing up to 6 financed properties on FHLMC using the 1-4 FHLMC financed property guidelines, thus allowing cash out up to 6 financed properties. For details, read more.

Effective with Mandatory commitments created on and after January 12, 2015, Nationstar Mortgage changed the way it prices High Balance loans in Mandatory Commitments.

Penny Mac announced late in January that the PDF and CSV file types will no longer be available for download.  Going forward, the Excel format will continue to be available and will be the sole format offered. For this and other announcements, visit Penny Mac announcements.

Simplified, an online platform for ordering settlement services to process and close real estate loans, has launched its secure, cloud-based system that simplifies the delivery of settlement services, allowing lending institutions to consolidate local and national vendor relationships together on one easy-to-use and intuitive interface. With Simplified, lenders can process and close any real estate secured loan, from credit to closing and beyond, by ordering services either directly from Simplified's vendors or using the lender's own local vendors. For details, click the link to find out more.

Are you looking for Foreign National products? Athas Capital Group continues to spread the word that it is funding Foreign National products: visit the Athas Capital website.

Broadview Mortgage's Community Access Matrix has been updated to reflect the correct Median Income Limits and is now available on the Big Picture.  This updated matrix is available on AllRegs. For questions please contact announcements@broadviewmortgage. com. Click the link to view Broadview Community Access Matrix.

And what is happening out there in the capital markets? A sample or recent stories...

Up at STRATMOR, Dr. Matt Lind told me of a statistical regression analysis he recently completed which estimated the Net Gain on Sale for mandatory versus best efforts delivery based on 2013 origination data obtained from 68 lenders of all sizes. According to Matt, many STRATMOR clients want to understand the extent to which differences in their secondary marketing execution practices account for shortfalls in their "Net Gain on Sale."  While loan mix is obviously an important factor, Matt told me that based on his analysis "on average, in 2013, across all production channels, mandatory delivery generated 315 bps in NGOS versus 279 bps in NGOS for best efforts execution, a 36 bps spread."  Matt hopes to have a more current analysis available by mid-Spring based on full-year 2014 results.

Peer-to-peer lending is on the rise, with no better example of this than San Francisco based Social Finance Inc.'s largest bond issue to date of $313.8m. The issue balance is backed by $348.6 million of borrowings that former graduate students mainly used to refinance existing federal loans, according to the presale report. In a similar business model, LendingClub Corp. raised $870 million in an initial public offering last year and is now valued at $7.5 billion, while SoFi Chief Executive Officer Mike Cagney told The Wall Street Journal in October that it expected to file for an IPO this year. SoFi, which has originated more than $1.5 billion of loans since being founded in 2011 by focusing on refinancing the debt of former students, announced in October it would also deal in home mortgages. Borrowers are changing, and access to credit appears to be evolving.

I recently received an email question regarding Freddie Mac; it read, "Rob, what the heck is Freddie Mac's STACR, some kind of agency spy satellite?" No, besides, I believe Freddie and Fannie are more into drones than satellites. STACR stands for Structured Agency Credit Risk and at its core are debt notes which are unsecured and un-guaranteed bonds issued by Freddie Mac whose "principal payments are determined by the delinquency and principal payment experience on a STACR Reference Pool consisting of recently- acquired single family mortgages from a specified period." Say what, you ask? It breaks down like this; in STACR deals, the note holders are not entitled to receive any cash from the mortgage loans in the reference pool, which is different from a normal residential mortgage-backed securitization offering. Instead, with STACR deals, the performance of the underlying loans dictates the timing and amount of principal and interest that Freddie is obligated to pay on the notes. In essence, Freddie Mac transfers credit risk from the mortgages in the Reference Pool to credit investors who invest in the STACR debt notes. The timing of the question couldn't be more perfect as Freddie Mac priced its first 2015 STACR risk-sharing deal of the year. STACR 2015 DN-1 priced as follows: The M-1 class priced at one-month LIBOR plus a spread of 125 basis points. Pricing for the M-2 class was one month LIBOR plus a spread of 240 basis points. Pricing for the M-3 class was one month LIBOR plus a spread of 415 basis points. Pricing for the B class was one month LIBOR plus a spread of 1150 basis points.

The market is taking direction from the Federal Reserve whose Governors said the recovery of the U.S. economy is too fragile to risk by raising interest rates. According to minutes of their January policy meeting, officials fear that a premature increase could dampen economic growth so much that the central bank would have to reverse course and return stimulus programs. So analysts are shifting back their "short term rates are going up this summer" to possibly the autumn. Either way, overnight rates don't determine 30-year mortgage rates.

Nothing out of the ordinary happened in the bond markets Thursday. How do you like that for technical analysis? Sure we had some movement in different coupons (rates), and a little movement based on type of security or maturity, and there was more talk of Greece. But really it seems folks are more focused on the weather and enjoying the holiday week than on rate volatility. And don't look for any news out of the United States today as we wrap up the end of ski week in many locales. As a proxy for the rates we had a 2.11% close Thursday (after a 2.07% Wednesday, and 2.14% Tuesday) on the 10-yr.; agency MBS prices are better by .250 as the 10-yr is down to 2.07%.

Jobs and Announcements

In jobs news, an FDIC Bank branch located in Rancho Cordova, CA is looking for a senior underwriter with advanced analysis skills in the areas of credit, layered risk, and income. The candidate must have the ability to underwrite loans at a national level and in all markets. FHA - Direct Endorsement (DE) designation required VA - Lender Appraisal Processing Program (LAPP) and/or Staff Appraisal Reviewer (SAR) designation(s) required Experience with Desktop Underwriter (DU) or comparable automated underwriting system required. Basic computer skills required. Experience with Encompass is a must.  Minimum of 5 years mortgage underwriting or lending experience required. Confidential inquiries or resumes should be sent to me at rchrisman@robchrisman. com.

And Caliber Home Loans is continuing to expand and is now hiring highly skilled Branch Managers and their teams as well as individual LO's in Alabama, Mississippi, Louisiana, Tennessee, Arkansas, North Carolina, South Carolina and Georgia. "If you can imagine a mortgage company where sales are the main focus, marketing is robust and plentiful, servicing is retained and leadership listens... You have just imagined Caliber Home Loans, Inc.  Caliber Home Loans is dedicated to providing their sales force with the most cutting edge sales tools, marketing and customer retention platform in the industry. With a servicing portfolio of over $60 billion and growing, a fulfillment team committed to getting your loans closed quickly and accurately, and the recent acquisition of Cobalt Mortgage, Caliber Home Loans is primed and ready for major growth in 2015." Contact Bobbi Jo Wiggins, Senior Sales Recruiter, for a confidential conversation or interview.

Last but not least congratulations to Matt Feigner who recently accepted a Vice President - RM position with Agri-Access. Matt is focused on adding new correspondent partners in all 50 states.  Agri-Access offers a niche program under the RuraLiving Home Mortgage name. RuraLiving gives correspondents access to long term fixed rates for Hobby Farm properties that typically do not conform to traditional secondary market financing. Eligible properties can include 5-160+ acres, allow Schedule F income, outbuildings and distant comps.